TPA Testifies Against NAIC Capital Rules Over Arbitrary Risk Charges and Lack of Transparency

On April 16, the Taxpayers Protection Alliance (TPA) provided comments on the National Association of Insurance Commissioners’ (NAIC) “C-1 Subcommittee Update on CLO C-1 Factors Modeling,” which is currently open for comments. On May 6, TPA Executive Director Ross Marchand is providing oral comments.

 

TPA is concerned that the modeled base factors for collateralized loan obligations (CLOs) reflect a predisposition to assess CLO-related risk based on an arbitrary bias against certain investments. Raising the risk-based capital (RBC) charge on insurers that invest in non-investment-grade tranches of CLOs is particularly concerning because the entity raising the charge—the NAIC—wields government power while not being bound by the transparency requirements imposed on government agencies. TPA urges the NAIC to avoid raising prices on consumers and embrace transparency and the rule of law.